INDIAN MINING & CONSTRUCTION EQUIPMENT INDUSTRY

BACKGROUND & HISTORICAL TRENDS

Construction and mining equipment cover a variety of machinery such as hydraulic

excavators, wheel loaders, backhoe loaders, bull dozers, dump trucks, tippers,

graders, pavers, asphalt drum / wet mix plants, breakers, vibratory compactors,

cranes, fork lifts, dozers, off-highway dumpers (20T to 170T), drills, scrapers, motor

graders, rope shovels etc. They perform a variety of functions like preparation of

ground, excavation, haulage of material, dumping/laying in specified manner, material

handling, road construction etc. These equipment are required for both construction

and mining activity.

With a wide production capacity base, India is perhaps the only developing country,

which is totally self-reliant in such highly sophisticated equipment.

India has only a few, mainly medium and large companies in the organized sector who manufacture these. The technology barriers are high, especially with respect to mining equipment and therefore the role of SME’s is restricted to manufacture of components and some sub-assemblies.

Prior to the 1960s, domestic requirements of mining and construction equipment were

entirely met by imports.

Domestic production began in 1964 with the setting up of Bharat Earthmovers Ltd.

(BEML), a public sector unit of the Ministry of Defence, at Kolar in South India to

manufacture dozers, dumpers, graders, scrapers, etc. for defence requirements under

licence from LeTorneau Westinghouse, USA and Komatsu, Japan. In the private

sector, the Hindustan Motors’ Earthmoving Equipment Division, was established in

1969 at Tiruvallur, near Chennai with technical collaboration from Terex, UK for

manufacture of wheel loaders, dozers & dumpers. This factory has since been taken

over by Caterpillar for their Indian operations. The machines manufactured by

Caterpillar in the Tiruvallur factory are marketed by TIL and GMMCO.

In 1974, L&T started manufacturing hydraulic excavators under license from Poclain,

France. In 1980 and 1981, two more units, Telcon and Escorts JCB commenced

manufacture of hydraulic excavators (under license from Hitachi, Japan) and backhoe

loaders (under license from JCB, UK) respectively. Escorts JCB has been taken over

by JC Bamford Excavators Ltd. U.K. in 2003 and is now called JCB India Ltd.

Volvo and Terex Vectra are the most recent entrants in the Indian market. Volvo has

set up their manufacturing unit in Bangalore.

At present they are only manufacturing tippers and the other equipment are imported

from their parent company and marketed in India.

Terex Corporation USA and Vectra Ltd. U.K. have formed a joint venture, which has

started manufacturing construction equipment like backhoe loaders and skid steer

loaders from May ’04 at Greater Noida with an investment of USD 12 million. Other

equipment in the Terex range are being sold through their agents in India.

Most of the technology leaders like Case, Caterpillar, Hitachi, Ingersoll-Rand, JCB,

John Deere, Joy Mining Machinery, Komatsu, Lieberr, Poclain, Terex, Volvo are

present in India as joint venture companies, or have set up their own manufacturing

facilities, or marketing companies.

The industry has made substantial investments in the recent past for setting up

manufacturing bases, despite small volumes and uneconomic scales of production

compared to global standards.

Current Status in India The growth of this sector is interlinked with the growth of the Indian economy and indirectly with the growth of infrastructure. This is evident from the graph shown below:-

CO-RELATION BETWEEN STATUS OF ECONOMY AND THE INDUSTRY

4.0%

8.5%6.9%

10.5%13.6% 13.3%12.1%15.0%

33.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2002-03 2003-04 2004-05

Earthmoving & Construction sector growth rate% change in GDP %change in IIP in capital goods

Chart 1 The last few years have witnessed a phase of restructuring in the industry through acquisitions and joint ventures. This also reflects the active interest of international majors in the domestic market. Many international players have also appointed selling agents for importing and selling complete equipment in India.

The construction and mining equipment industry is dominated by a few large

manufacturers in each product segment. BEML supplies to nearly half the total

market. BEML & Caterpillar lead in dumpers and dozers while L&T-Komatsu and

Telcon lead in excavators and JCB India in backhoe loaders. The market share and total market size as per CMIE data of the product range covered by the study is given below: -

Major Products Companies Market Share (%)

Earthmoving Machinery Bharat Earth Movers Limited 50.01

Telcon 15.48

L&T Komatsu 8.30

Larsen & Toubro 3.16

Tractor Engineers 1.24

Hyderabad Industries 0.22

Ingersoll-Rand (India) 0.21

T R F 0.11

Jessop & Co. 0.09

A C C Machinery Co. 0.06

Greaves Cotton

Voltas

Bemco Jacks & Allied Products

Viraj Technocom

Texmaco

Tata Motors

Southern Structurals

Marshall Sons & Co. (Mfg.)

Hindustan Motors

Garden Reach Shipbuilders & Engineers

Escorts JCB

Total number of companies :

27

Total market size: Rs.3516.2 Cr.

Source: CMIE, Industry Market Size and Shares, February 2005 and compilation of company data. Total Market Size of all the three product groups add up to Rs.4232 crores.

Structure of the Sector

71% of the sector comprises of public limited companies including PSU’s and 29% private limited, or joint ventures including closely held private limited companies.

Construction Machinery Gujarat Apollo Equipments 39.07

Apollo Earthmovers 10.05

Apollo Industrial Products 7.53

Shethia Erectors & Material Handlers

6.58

Rico Auto Inds 6.19

International Combustion 5.08

TRF 5.03

Total number of companies : 49

Total market size: Rs.171.2 crores

Cranes TIL 14.47

Greaves Cotton 9.31

Mukand 7.92

WMI Cranes 5.55

Hercules Hoists 5.37

Jessop & Co. 0.96

Hyderabad Industries 0.83

Millars India 0.14

Cranex 0.13

Brady & Morris Engg. Co. 0.04

Braithwaite & Co.

Voltas

Vikatmev Containers

Southern Structurals

Marshall Sons & Co. (Mfg.)

Marshall Sons & Co. (India)

Elecon Engineering Co.

Total number of companies : 31

Total market size: Rs.544.3 crores

TURNOVERWISE SEGMENTBelow 100

crores

31% of

companie

s

>500

crores

25% of

companie

s

100-500

crores

44% of

companie

s

Chart 2

75% of the companies manufacturing in India were involved in the entire range of activities like design and engineering, manufacturing, erection, servicing and commissioning. There are only a few companies who act as selling agents for international players. There are others who manufacture and also import complete equipment or in SKD condition from their principals abroad and market them. Since each piece of the equipment in this product category has substantial value, a number of companies have a turnover of over 100 crores and the larger ones have a turnover above Rs.1000 crores. The technology barriers have made the industry less fragmented in the mining machinery sector whereas it is fragmented in the road construction equipment and the material-handling segments. The international trend in the earthmoving and mining segment is one of consolidation. This trend is also beginning to be seen in India. Some international companies are looking at the prospects of enhancing their market presence based on higher investment in mining and infrastructure and also using their Indian operations to meet demand in South and South East Asia.

The industry’s expectations of the likely future evolution in this sector is represented

here in graphical form. Most of the current players expect that new players will enter

the Indian market.

INDUSTRY'S VIEWPOINT OF FUTURE EVOLUTION

ENTRY OF NEW

PLAYERS

65%

CONSOLIDATION

35%

Chart 3

Technology The construction and mining equipment sector has a wide range of products. For the purpose of this study, this is taken to mean the following :

Construction Equipment Mining Equipment

Backhoe Loaders Dumpers Crawler Dozers upto 320 HP Dozers (above 320 HP) Crawler Excavators above 3.5 Cu.M. Hydraulic Excavators (65 T and above) Loaders Rope Shovels Motor Graders Drag Lines Skid Steer Loaders Drills Wheel Loaders below 3 Cu.M. Wheel Loaders above 3 Cu.M. Vibratory Compactors Surface Miners Dump Trucks (below 35 T) Off Highway Dumpers (above 35 T) Tippers Continuous Miners Breakers Long Wall Equipment All Terrain Cranes Asphalt Pavers Asphalt Drum / Wet Mix Plant Fork Lifts

The technology leaders in the construction equipment sector are: Komatsu, Caterpillar, Hitachi, Terex, Volvo, Case, Ingersoll-Rand, HAMM, Bomag, John Deere, JCB, Poclain, Bitelli, Kobelco, Hyundai and Daewoo. Except for the last 3, all the other companies are present in India either as joint ventures, or have set up their own manufacturing facilities, or marketing companies. In the mining sector, the leaders are: Wrigten, Atlas Copco, Liebherr, Joy Mining Machinery, Hitachi, Komatsu, Terex, Ranson & Rappier, Bucyrus Erie and DBT. Out of these companies, DBT does not have any technology transfer and neither is it manufacturing in India. Joy Mining Machinery has a small operation in India to manufacture spares and provide sales support. However, these are the two leaders in continuous mining and long wall equipment in the world. In the construction equipment sector, the level of technology prevalent internationally can be made available in India through joint ventures. However, the equipment currently being manufactured in India is not of the same size. For example for a 15 Cu.M. hydraulic shovel, the manufacturers do not feel the need to bring in the technology due to low volumes and uncertain demand though the companies have the manufacturing facilities and design capabilities to manufacture the same in India. Some of the other reasons for not manufacturing the latest equipment are :

• The Indian market cannot absorb the cost of the latest technology • If manufactured in India for export markets, most of the components will have

to be imported

• Equipment adhering to the latest emission norms cannot be used since the quality of fuel required for them is yet to be made available here. At the same time, off highway construction and mining equipment do not need stringent emission norms in India.

The construction equipment sector in India has evolved over the years and is at present in an intermediate stage of development. The industry is trying to bring in international levels of technology as demand and the scale of operation increases. The users are now not looking at only the initial cost of the equipment, but focusing on total costing, or cost per ton of usage. It is anticipated that 5 years hence, the need for more and more mechanization and enhancement of scale may lead to change in the level of technology in use. Advances in technology have allowed an increase in haul truck and rope shovel size. For example haul trucks are now being manufactured upto 400 tons capacity. Here the increased machine size has provided an opportunity for increased production. In the case of mining equipment, the technology depends on the mining operations prevailing in the country. In India, open cast mining is much more popular than underground mining. Hence for the equipment required for open cast mining like dumpers, dozers, shovels, draglines and excavators, the level of technology of the equipment manufactured is at par with international standards except with respect to usage of electronic controls, hydraulic systems and engines adhering to the latest emission norms. Long wall mining technology was introduced in the early 1970s with the help of the UK and Poland in some of the coalfields. During that period some of the PSUs like MAMC and Jessop had imported technology from the UK to manufacture these equipment. However, long wall mining was not given a thrust by the major coal companies and due to lack of demand, both the companies suffered losses and today there are no companies in India who have the technology for long wall mining equipment. There are very few companies who are leaders in this field viz. DBT Germany, Joy Mining Machinery USA, some Russian and Chinese companies and none of them are keen in transferring technology without the assurance of volume. Where underground mining is concerned, in India the production technology is not yet fully mechanized. There are two methodologies of production viz. bord and pillar mining and long wall mining. The equipment required for bord and pillar mining viz. load haul dumpers and side discharge loaders are being manufactured in India. However, the full range is not yet being manufactured.

Fully mechanized methods in steep dipping seams have not been applied in Indian mines yet. However in India a portion of the coal reserves are located in steeply dipping seams, for example in SCCL 1,800 mill. tons of coal is located in virgin areas with gradient >1:4. Outside India, steeply dipping seams have been mined in different countries notably Germany, Spain, France, Russia and others. Depending on the dip, different methods

and equipment have been used such as cut-and-fill in France and fully mechanized longwalls in Spain and Germany. Also in the 1980s new mining equipment such as the AK-3 and the AKH were developed for these conditions. In India steeply dipping seams mean any coal seam with a gradient of more than 1:4 (>14o) mainly because experience in operating mechanized longwalls under these conditions is not available in India. In Germany on the contrary, 14o or more is regarded as “normal” conditions and is not treated as very special. When operating under “steeply dipping” conditions a number of technical and operational aspects require attention; the main ones are: - How to handle changes in face length due to changes in gradient - How to handle changes in strike direction - Handling of the intersection between maingate and face and tailgate and

face - How to control face creep - Installation of equipment - Adaptation to equipment to make them suitable for operating under these

conditions - Driving of roadways - Testing of equipment - Avoiding an uncontrolled movement of coal down the face - Operating experience in longwall faces in seams with a steep gradient

Also installation of the equipment in a steeply dipping seam is different from a normal “flat seam”. Due to the fact that the seams are dipping and depending on the seam thickness, the drivage of the roadways is sometimes also partly in the roof and/or floor. Continuous miners are mostly no longer suitable for the purpose and road headers or even drilling and blasting are required. The exact position of the roadway in the seam will depend on factors such as: - Type of discharge between face conveyor and stage loader - Seam thickness - Type of roof - Type of floor

In the mining industry what has been proven to be productive, safe and available is generally not changed, unless the new technology is more productive, safer and a higher utilization is expected. This is valid for the surface mining technology too. In the open-cast mining industry mechanical mining was more or less limited to soft overburden and pay material (lignite, soft coal). However, in the late 1970s / early 1980s the first cutting systems

were introduced to the open cast mining industry which showed a tendency to be able to cut harder materials too. Different systems started this attempt :

� Roadheaders (Dosco twin boom) with the experience and background from underground mining and tunneling

� Voest Alpine developed a boom mounted drum machine � Thyssen-Krupp tried to continue the development of the sattleweight bucket

drum concept � Huron in cooperation with Morrison Knudsen developed a central drum

machine (Easi Miner) for cutting thin seams of lignite In the early 1980s Wirtgen entered the mining scene. With more than 10 years experience and background from cutting hard, abrasive and tenacious materials like asphalt and concrete roads with high precision, it was only a small step to convert this technology for cutting rock. The first Wirtgen surface miner was sold in 1983 to mine gypsum in South Africa. The customer benefited from the following advantages the Wirtgen surface miner offered:

� Selective mining of thin horizontal gypsum layers with different qualities � Cutting and sizing the material directly during the mining process eliminating

blasting and crushing and therefore simplifying the mining and processing

However, it took another 10 years to make this technology mine proven. This was when Wirtgen actively started to introduce this technology to the Indian mining industry. In 1994 a Wirtgen surface miner 1900 SM demo machine started tests in Ambuja Cement’s Gujarat operations. This machine proved the ability of mining and sizing the soft limestone without blasting. In the same year Madras Cements purchased the first new Wirtgen surface miner 2100SM. Since then surface miners have become the standard mining machine in all soft to medium hard limestone mines in India:

Gujarat Ambuja 7 Wirtgen surface miners Madras Cements 5 Wirtgen surface miners India Cement 3 Wirtgen surface miners MPL 2 Wirtgen surface miners

This success led Coal India to look more closely at this technology. Wirtgen was faced with the situation of blocked coal in the Mahanadi Coalfield. More than 7 Mn. tons of coal were situated close to a village and could not be mined because of blasting restrictions. Mahanadi Coal Ltd. together with Wirtgen developed a project to mine this coal using surface miners.

This first success story led to continuing projects with increasing amounts of coal to be mined. Today, more than 25 Wirtgen surface miners, are producing approximately 40

Mn. tons of coal annually. Apart from MCL this technology is now used in SECL and CCL also. Starting with the 2100SM, a 6,000 t/day production machine, Wirtgen developed the 2200SM, a 9,000 t/day production machine, to reduce production cost. Besides Wirtgen, Caterpillar with a Bitelli Surface Miner introduced a machine for the “low production class” (approx. 6,000 t/day). L&T developed a machine for the higher production (approx. 12,000 t/day). Elecon introduced Huron Easi Miner and Vermeer one rear drum concept machine. However, presently it seems that the mid drum concept with an upwards rotating drum is the best concept. Only machines with this concept (Wirtgen, Cat/Bitelli, L&T) reach the required targets viz.

� Produce small gradation, also in harder materials with good production � Mine selectively and produce a clean and even surface

Improvement in productivity, reduced operating costs and control of gradation are the next targets Wirtgen is working on. Wirtgen therefore improved the 2200SM model. This machine with its 3.8 m wide drum is targeted to cut 12,000 t/day, which is a 50% improvement compared to the basic 2100SM model.

With a 40% higher motor power (840 against 610 PS) this upgraded 2200SM is now able to handle double the production. Surface mining technology has reached high acceptance in the Indian mining industry. Wirtgen was the pioneer to make mechanical mining of harder rocks possible in the Indian mining industry. Wirtgen is still the number one when high productivity, lowest operating costs, gradation control and high availability are required. The application of surface miner technology leads to:

• Extracting medium hard minerals by taking advantage of the higher efficiency of continuous excavating.

• Extracting of ‘run of mine’ product in one step which makes at least the primary crushing stage dispensable.

• Eliminates the hazards of blasting and environmental impact arising out of it • Extracting of valuable minerals in a selective manner for a higher efficiency in

the processing plant. Experience indicates that the cost effectiveness and overall efficiency of continuous mining with surface miners is determined significantly by the local operating conditions besides the actual mineral properties like compressive strength (UCS). Based on the mine site conditions e.g. block length, seam thickness and the production targets (e.g. annual production, operation hours) MAN TAKRAF mining specialists have developed together with customers the most efficient long-term operation scenario. In the 1970s TAKRAF engineers started working on the challenging task to operate BWE’s in hard coal with even harder interburden layers. In the Kazakh hard coal mine

of Ekibaztuz, BWE’s with adopted bucket wheels have been in operation for more than thirty years in temperatures down to –40oC. In conjunction with the bucket wheel excavators, TAKRAF also set the technical benchmarks of conveying and spreading systems. Flagship is a cross pit spreader with 195 m (640 ft) boom which TAKRAF supplied for a coal mine in Siberia. This machine as well operates under extreme climatic conditions down to –40oC. The EL ABRA project in Chile for instance contained an innovative on-off leaching system. For the reclaiming process, MAN TAKRAF adopted the bucket wheel technology and developed a crawler-mounted reclaimer working in front operation. The main advantage is the machine’s high efficiency compared to common slewable machines. The development of semi mobile crushing stations was the crucial key to get access to many projects in hard rock mining. Escondida is one example where MAN TAKRAF supplied two such stations with an extensive conveyor system. Station No.2 with a 60/89 gyratory crusher is rated for 5,700 t/h (6,283 sht/h) and reaches under favourable conditions upto 13,000 t/h (14,330 sht/h). The station was relocated in 2003 in less than 15 days. Station No.3 with 60/113 gyratory crusher is rated for 8,800 t/h (9,700 sht/h) and was successfully commissioned in 2003. There are four major advantages that the application of this technology has:

• This technology allows for continuous extraction of medium hard and hard minerals and makes blasting obsolete

• It provides for a small sized product thus taking over the function of primary and secondary crushing

• But most exceptional is the possibility to mine in a selective manner • By using this technique the valuable minerals can be extracted with a high

degree of purity from deposits with challenging interburden layers

It is expected that with the pick up in mining activity in India, mining companies will realize the need for higher production capacity and productive technologies. The demand for these equipment will lead to Indian companies starting to manufacture these equipment in the near future.

Design & Engineering

Most manufacturing companies in this sector in India have design and engineering departments catering to their in-house requirements and all of them are fairly well equipped using CAD/CAE. This is required because while the products may be fairly standard, there are changes, which need to be incorporated as per customer specifications and for product development.

The percentage of engineering hours spent on doing engineering rework was found to

be an average of 12% ranging from 0.5% to 20% in some companies.

90% of the companies with technology collaborations have completed technology

absorption. However most of the critical components are being imported and most of

the technology absorption is in terms of non-critical items, or medium / low technology

items. 35% of the companies however, faced problems in retaining the personnel who

have been trained abroad during the technology absorption phase.

Research & Development 65% of the companies surveyed have their own R&D set up and 90% of them have started allocating for R&D since the 1990s. However, the percentage of sales budgeted for R&D was meagre ranging from 0.5 to 3% of sales. 35% of the companies surveyed worked in collaboration with some educational/domestic research institutes. The prominent amongst them being the IIT’s and IISc Bangalore. When benchmarked against global companies, it was noted that companies like Caterpillar, Komatsu and Volvo spent approximately 3% of sales on R&D which is USD 880 Mn., 34000 Mn. Yen, 975 Mn. SEK respectively compared to the highest spender in India investing approx. Rs.16 crores.

Although many of the manufacturers have established full-fledged R&D units to

update their products/technologies, the industry in India does not invest adequately in

R&D activities compared to world leaders like Caterpillar or Komatsu, as the existing

market cannot absorb the development costs. However, we may see more R&D

work by world majors in India, taking advantage of low R&D manpower costs.

Management Efficiencies The industry is quite mature in terms of marketing abilities as compared to the other sectors of the capital goods industry. Majority of the companies have strategic planning programmes in place and have well chalked out business strategies at all levels.

In order to enhance their market share, companies need to improve quality and service followed by reduction in costs, increase in product range and finally adopt more aggressive marketing strategies. The competitive edge lies in satisfying customers by delivering higher quality products at lower prices. Strategic alliances are already in place among 60% of the companies surveyed. These are primarily focused on developing and combining competencies with the help of other organizations in terms of marketing, after sales service etc. Only 45% of the companies are interested in growth through mergers and acquisitions. The level of quality consciousness is on an average higher than the other sectors probably because the companies are larger and many of them are associated with international companies either for manufacturing or marketing their products. Another reason for higher quality consciousness is that more companies in this sector are well

versed with the soft technologies being used worldwide for enhancing competitiveness and quality. Approximately 90% of the companies covered under the study have either implemented, or are implementing soft technologies like six sigma, lean manufacturing etc. 100% of the companies manufacturing in India are ISO certified. It was noticed that the percentage of scrap due to errors in manufacturing is between 2% & 5% and the percentage of labour hours spent on reworking was 4%. All the manufacturing companies train their workers on quality concepts. However the percentage of workers who received company sponsored training on quality concepts in the past two years varied from 20% to 100% in some companies. The average number of hours per person of training provided was approximately 16 hours per person varying from 6 hours to 35 hours per person per annum. Most of the companies were quite responsive to customer complaints and the average number of days taken to respond varied from ½ a day to 5 days in some companies. More than 70% of the companies have undergone business process reengineering for higher customer satisfaction. It has been observed that the majority of the companies in this sector are between medium and high users of computerization. The various activities computerized by the percentage of companies are shown in chart 5.

LEVEL OF COMPUTERIZATION OF COMPANIES

HIGH

45%

LOW

5%

MEDIUM

50%

100%

80%

50%

35% 35%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

TRANSFER OF

BUSINESS

INFO

INVOICES INTEGRATIN

WITH MRP OR

PRODUCT

SCHEDULING

Chart 4 Chart 5

This level of computerization is also comparatively high compared to the other sectors of the capital goods industry. Yet the percentage of IT expenditure to sales in the last one year i.e. 2004-05 was a meagre 0.5% of the total sales i.e. Rs.32 crores was invested by the industry towards computerization either for ERP / SCM / CRM.

SOFTWARES USED BY COMPANIES

CRM

23%

SCM

5%

ERP

72%

Chart 6 ERP or enterprise resource planning is an industry term for the broad set of activities supported by multi product application software that helps a manufacturer to manage the important functions of its business including product planning, parts purchasing, maintaining inventories, interaction with suppliers, providing customer service and tracking orders. Supply Chain Management (SCM) is the management of the entire value added chain, from the supplier to manufacturer right through to the retailer and the final customer. SCM has the primary goal of reducing inventory, increasing the transaction speed by exchanging data in real time and increasing sales by implementing customer requirements more efficiently. CRM (Customer Relationship Management) entails all aspects of interaction a company has with its customers, whether it be sales or service related. CRM is an information industry term for methodologies, software and usually internet capabilities that help an enterprise manage customer relationships in an organized way. Companies need to be in constant touch with their customers over the electronic media. The percentage of companies using ERP solutions is high with quite a significant number also using CRM for better customer relationship management. However, all the players need to be better integrated with both their suppliers and customers to strive to be the market leader. After-sales service is an important aspect of a company’s successful business strategy because all customers would like higher productivity and utilization from their machines in order to be cost competitive. Hence this is an area no company can afford to ignore or accord a lower priority to. All the companies surveyed whether manufacturing, or trading, offered after-sales service to their customer and it was also noted that 70% of them have entered into this field in the last ten years.

Equipment manufactured by the industry is mostly mobile and hence subjected to higher wear and tear and consequently maintenance requirements are higher. Users rate machines with lower downtime higher. Hence, training of maintenance personnel both of manufacturers as well as users’ is a very important aspect of

managing customer relationships. This is also evident from the fact that all the companies spent on training and the majority of them (60%) spent more than Rs.1 lakh per month. Only 40% of the companies spent less than Rs.10 lakh per annum

on employee training.

TRAINING EXPENDITURE

10 LAKHS AND BELOW

41% of the companies.

10-50 LAKHS

59%of the companies

Chart 7 The average response time for responding to customer calls is 24 to 48 hours and in premium service contracts it varied between 12 to 36 hours. 91% of the maintenance calls were completed within the specified time frame.

From the user feedback, it emerged that the deliveries of most of the companies were delayed. Hence many customers preferred to import second hand machines. Scheduling is therefore required to be strictly followed by all the companies for manufacturing, and approximately 90% of them use one, or the other software to enhance efficiency in manufacturing. Yet the percentage of companies where the shipments are before/within the due date is very low at only 50%.

PERCENTAGE OF TIMELY DELIVERY TO CUSTOMERS

Within 70-80%

12% of companies

Within 80-90%

41% of companies

Below 70%

6%of companies

Above 90%

41% of companies

Chart 8 A clear distinction was noticed in terms of reasons for late delivery.

� Companies predominantly manufacturing construction equipment have attributed more than 70% of their late deliveries to delay in customer clearance.

� Whereas companies predominantly manufacturing mining equipment have attributed the majority of their delays to delay in material availability largely as a result of imports as well as delays in manufacturing.

The reason for late deliveries is attributed mainly to the growth in domestic demand, which was not foreseen earlier by the companies. Delays were therefore mainly attributed to capacity constraints. A fall out of delayed delivery has been higher imports both for new machines, as well as second hand machines. This issue can be tackled by enhancing capacity of both the manufacturers and their sub-suppliers, tighter monitoring and scheduling and by greater usage of ERP / SCM.

Benchmarking with International Companies

Some broad indications in terms of benchmarking of the industry on the basis of financial parameters have been done against a few global players, this is provided in Annexure IV. The companies against which Indian companies have been benchmarked are Caterpillar, Komatsu and Volvo. They are the leaders in their respective fields.

Operational Efficiencies

Financial Parameters

The CII survey results showed that there has been a good growth rate in terms of sales due to the higher investments by the user sectors. Though exports have also risen, the percentage of exports to sales is low due to lack of competitive advantage of machines built with indigenous technology. Wherever machines are built under technology transfer, companies face restrictions on the export market territory from the technology provider.

SALES AND EXPORTS OF DOMESTIC

COMPANIES

4150

6300

4750210 215

264

0

1000

2000

3000

4000

5000

6000

7000

2001-02 2002-03 2003-04 2004-05

0

50

100

150

200

250

300

TURNOVER EXPORTS

Exports as a percentage of sales

5.40%

14.70%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

For the industry For the non-

electrical

machinery2003-04

Chart 9 Chart 10

As is evident, the cost of raw materials as a percentage to sales witnessed a fall in 2003-04 probably due to better supply chain management on the part of the respondent companies. However the unprecedented rise in steel prices in 2004-05 has offset the reduction.

RAW MATERIAL AS A PERCENTAGE OF

NET SALES

63%

62%

64%

62%

62%

63%

63%

64%

64%

65%

2002-03 2003-04 2004-05

Percentage of Power consumed to

sales

0.89%

0.82%0.82%

0.78%

0.80%

0.82%

0.84%

0.86%

0.88%

0.90%

2002-03 2003-04 2004-05

Chart 11 Chart 12 The power consumed to sales has shown a decline because all companies are now conscious about energy conservation and use various methods like automatic switching of systems and higher efficiency / low consumption electrical appliances etc. Value added for an industry is the difference between the value of the output and the value of the input namely raw materials & bought outs. In other words we can attribute this difference to the value added to the product by the company.

VALUE ADDED AS A PERCENTAGE OF NET SALES

33%

38%

37%

30%

31%

32%

33%

34%

35%

36%

37%

38%

39%

2002-03 2003-04 2004-05

Chart 13

The value addition has risen over the years because more manufacturing has taken place in 2003-04 in place of trading as compared to the earlier years. It has again shown a fall due to the rising raw material prices in 2004-05.

Inventory on an average was found to be 26 percent of net sales. Average Turnover of Inventory for 2004-05 was found to be 4. The international benchmark is between 5 - 7. The number of days sales outstanding is on an average within 90 days, which is at par with the engineering industry. This is also in keeping with international trends.

OUTSTANDING

85

81

83

79

80

81

82

83

84

85

86

2002-03 2003-04 2004-05

No.of days sales

Chart 14

Cost of wages to sales was found to be 11.8 percent in 2004-05. The range varied from a low of 3 percent to a high of 28 percent. For Caterpillar Inc. the ratio was 19.8 percent. The employee productivity is fairly low as compared to international companies. Sales per employee on an average for the industry was found to be Rs.35 lakhs but for the manufacturing companies it was found to be Rs.32.5 lakhs. This is the reason why though the cost of wages per employee is very low at Rs.4 lakhs, the lower productivity of the employee offsets the advantage. The value added per employee was only Rs.11 lakhs. The global standards for employee productivity i.e. sales per employee is in the range of Rs.160-175 lakhs. Profitability The industry in India witnessed a tremendous jump in profitability in 2004-05 over 2003-04. The return on capital employed is 24 percent and has increased by 85 percent over 2003-04. The PBIT has increased by 112 percent and PAT by 145 percent. Operating profit to sales for Caterpillar Inc. was 9.7 percent

The PBIT to sales on an average was better in the case of Indian companies as compared to international companies operating worldwide like Caterpillar Inc., Komatsu or Volvo at 12 percent. However the capital employed has gone up by 14 percent since many companies had undertaken debt restructuring. Most of the companies have a very low debt ratio. In fact some of the companies have zero debt. Capital Investment The capex plans however are not so encouraging as compared to the profitability seen by the industry. Only 50 percent of the companies have capex plans and the amount is only 300 crores over the next 3 years. Productivity Parameters Machine and labour utilization

CAPACITY UTILIZATION

<70%> 85%

70-85%

20%40%

40%

LABOUR UTILIZATION

80-90%

70-80% >90%

40%

33%

27%

Chart 15 Chart 16 In 2003-04 the capacity utilization in this sector ranged between 50 percent to 85 percent depending on the market conditions. By and large the more efficient companies were operating at a level of 85 percent or more capacity utilization . It is interesting to note that the industry is experiencing delays in delivery due to capacity constraints. Yet at the same time the capacity utilization and levels of utilization of labour are not significantly high. This can be attributed to breakdowns as a result of inadequate maintenance, absenteeism, sub-contracting due to the attraction of lower prices and delays in receiving materials and components due to delays in imports. Machine breakdown ranged from 0.5 to 10 percent and most of the companies followed systems of periodic and preventive maintenance. Supply Chain. Procurement lead-time was very high in this sector ranging from 2 weeks to 6 months. The reason being that this industry has a large number of

proprietary items, which need to be imported, and 35 percent of the raw materials generally comprise of imported components. These components have to be imported because of their non-availability in India and hence most of the companies require an average of 1 month to 6 months as procurement lead-time. Most of the companies are procuring 50 to 80 percent of their raw materials and bought out components within a radius of 200 kms. from their manufacturing base .The lead time is high compared to global leaders. Though 100 percent of the companies have their vendors rated and have fairly good supply chain management systems, yet the procurement lead-time is very high due to the following reasons:

� Lack of proper port/airport infrastructure � Cumbersome procedural delays while importing � Lack of high level of computerization and integration with the supplier

network

User Sector Feedback

From the responses received from some of the major users of construction and mining equipment, it was noticed that large purchases were made in 2002-03 when the government investment in infrastructure projects like the Golden Quadrilateral was in full swing. For the same companies demand has tapered since then. In the mining sector the purchases have gone up in 2004-05. 25 – 30 percent of imported purchases made were of second hand equipment by the large private players, however, none of the Government owned companies have imported second hand machines.

One of the main reasons cited by some of the importers of second hand equipment was the delayed delivery by domestic companies. Cost-wise there was no benefit since the machines required total overhauling and retrofitting. When the indigenously available machines were benchmarked with the imported machines the users felt that cost-wise, indigenously manufactured machines were very competitive. The spare parts availability and servicing of the machines were much better than the imported machines, though it still fell short of customers’ expectations. Delivery of indigenously manufactured equipment was fairly poor though in a few segments like compactors, it was at par with International players. However when it came to technology, performance/productivity, reliability and downtime, the indigenously manufactured machines were rated lower than the imported machines. In the case of downtime, the domestic equipment had 10-15 percent higher downtime than the imported machines. Many of the international players in India do not manufacture the total range and therefore imports were a necessity. In cases where a particular technology was

specified by the user industry, and the same was not available in India, the machines were required to be imported. According to the operations and maintenance personnel of the user industry the priority that they gave while rating a machine was in the following order:

� Less downtime � Ease of maintenance � Power/Fuel consumption � Efficiency � Availability of spares parts and servicing � Eco-friendliness of the machine.

Indian manufacturers gave good service and spares backup at a reasonable cost as compared to International players. However, the user sector felt that there was scope for tremendous improvement, especially as international players were appointing agents in India who are gearing up to give service and training backup.

Market situation and Demand

The sector has seen a double-digit growth in its sales turnover for the past two years

with a phenomenal 33 percent growth in the previous year. The growth was seen

more in the mining equipment segment. There was comparatively lesser growth seen

in the construction and road making machinery. This may be viewed in the context of

the tapering off in demand under the national highway development programme from

the end of 2003.

The order backlog for the industry is Rs.3,400 crores as on 31st March 2005 which is more than 50 percent of the projected sales of the industry for 2005-06. The domestic demand in 2004-05 was Rs.6,300 crores and it is estimated that the demand in 2005-06 will be in excess of Rs.7,000 crores. Exports were to the tune of Rs.280 crores in 2003-04 and Rs.330 crores in 2004-05.

SALES GROWTH

4150

6300

4750 14.5%

33%

0

1000

2000

3000

4000

5000

6000

7000

8000

2002-03 2003-04 2004-05

0

0.05

0.1

0.15

0.2

0.25

Sales in crores % increase in sales

EXPORT GROWTH

209 216

330280

4.00%

18%

30%

0

50

100

150

200

250

300

350

2001-022002-032003-042004-05

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

Export in Rs crores % increase in exports

Chart 17 Chart 18 The industry is presently focused on meeting domestic requirements and is also striving to be competitive in the world market. The following indicates the market position for certain broad categories of equipment.

Hydraulic Excavators

Dozers & Dumpers

Wheel Loaders

Backhoe Loaders

Road Compactor

s

Cranes Fork Lifts

Telcon (Hitachi)

BEML Caterpillar India Ltd.

JCB India Ingersoll Rand

TIL (Grove)

Escorts Construction

L&T-Komatsu

Caterpillar India Ltd

BEML Caterpillar India Ltd

Escorts CEL

Telcon Voltas

BEML Udyog (Tatra)

Telcon Telcon (John Deere)

L&T Case Escorts CEL (Faun)

Ingersoll Rand

JCB India

Voltas (Unit Rig)

JCB India L&T Case Greaves Ltd (Bomag)

Voltas (P&H)

TIL

Caterpillar

India Ltd

Volvo BEML Gujarat Appolo Equipment

McNeill Engg.

Volvo Volvo Wirtgen India Pvt. Ltd

The equipment rental market is not yet fully developed but there are a number of companies who are now entering into the business encouraged by the low interest regime. This will further give a boost to the demand for small and medium sized equipment. The lowering of customs duties and removal of age restrictions have encouraged imports of second hand machinery used by the rental companies. This has also found favour with contractors. It helps them to focus on their core competencies of construction and project management, while having access to equipment without significant investments.

Future prospects of this industry is directly linked to the Indian economy and it is expected that the Indian economy will do well in the future. In recent years, the core sector of the Indian economy, particularly the mineral and mining industry, has made significant progress. The abundant mineral resources available in the country have led to the growth of the mining industry. This industry is basically labour intensive and can provide job opportunities for many. Mechanized mining operations have become popular in the recent years. Today, more and more companies engaged in open-cast mining resort to high mechanization in order to maximize the output of coal and other minerals. As a result, there is a marked trend in the introduction of large capacity and higher sized mining machines.

An overview of important user segments is given below:-

a. Mining

India is endowed with significant mineral resources and the mineral industry constitutes an important segment of the Indian economy. India produces 89 minerals which include 4 fuel, 11 metallic, 52 non-metallic and 22 minor minerals. A series of policy initiatives coupled with legislative changes have been carried out for speeding up investments and induction of "State-of-the-art" technology in the mining sector.

The Indian mineral sector represents a unique blend of small scale and large scale mining operations. In spite of large-scale mining operations, India is essentially a country of small-scale mining, since as much as 87% of the operations can be considered as small scale. Out of about 3000 reporting mines in the non-coal sector in India, only about 113 are operated by underground methods. The underground mines are presently confined to base metals, manganese ore, gold, chromate and some non-metallic minerals like soapstone, mica etc. The other major minerals are lignite, iron ore and limestone (production of 30m, 70m and 120m tons respectively). Considerable developments have taken place during the last few decades for enhancing the levels of production.

There are about 355 opencast mechanized mines in the country in the non-coal sector. Some of the unique examples are the Kudremukh Iron Ore Mines, Malanjkhand Copper Mines where mechanized mining is being carried out with advanced technology. Technology changes in the design of mine equipment and development of new stopping methods have made mining operations less

arduous, more productive and safer. With the recent liberalization in the minerals sector, it is envisaged that further technological upgradation / introduction of state-of-the-art technology will take place to achieve the projected growth of mineral production in the country. During the period November, 1995 to January 1998, the Foreign Investment Promotion Board approved 39 cases of Foreign Direct Investment in the mineral sector with an investment of over $700 million. These proposals are mainly in the fields of mining, exploration, mineral processing and technical consultancy.

73 applications for FDI involving investment of US$ 830 million have been approved by the Government till 2004. 165 reconnaissance permits have been granted for an area of 2,19,000 Sq. Km. till February 2004.

b. Coal

India produces over 340 million tons of coal annually. Government owned Coal India Limited (CIL) accounts for 90% of the total coal production. The other major producers are Singareni Collieries and TISCO (West Bokaro). Coal India has undertaken systematic planning and mechanization of coal mining in the nationalised coalmines in Eastern and Central India. It has adopted open-cast mining as the main mining method in preference to underground mining.

CIL is the biggest buyer of mining equipment in the country and has had a dominant influence on the development of the mining equipment industry. It has spearheaded adoption of innovative procurement and maintenance practices in the country.

In recent years, mining companies have been off-loading excavation work to private contractors leading to the development of a new segment in mining. The Government of India is actively considering privatisation of coal mining to give a boost to power generation. This development is expected to stimulate demand for mining machinery. During the year 2004-05 (01-04-2004 to 31-3-2005) 4 (four) project in coal sector and 4 (four) in lignite sector were sanctioned by the Government. Besides, 5 (five) advance action proposals (AAPs) were also sanctioned by the Government. The list of such projects sanctioned by the Government are given below:

Coal Projects Sl.

No. Name of the projects Company

Latest Capacity

(Mty)

Capital

(Rs. Crs.) 1 J.K. NAGAR UG (RPR) ECL 0.435 54.15 2. Kaniah OCP (PR) MCL 3.50 96.18 3. Kulda OCP (PR) MCL 10.00 302.96 4. Bhubaneshwari (PR) MCL 10.00 336.68

Lignite Projects Sl.

No. Name of the projects Company

Latest Capacity

(Mty)

Capital

(Rs. Crs.) 1 Mine_II Expansion NLC 4.5 MTPA 2161.28 2 TPS-II Expansion NLC 500 MW 2036.78 3 Barsingsar Lignite

Mining Project NLC 2.10 MTPA 254.07

4 Barsingsar Thermal Power Project

NLC 2X125 MW 1114.18

Advance Action Proposals

Sl.

No.

Name of the projects Company Capacity (MTY)

Sanctioned (Rs.Crs.)

1 Mine-III NLC 8 MTPA 2.60 2 TPS-III NLC 2X500 MW 1.35 3 Coal based Thermal

Power Plant at Tuticorin

NLC 2X500 MW 2.50

4 Coal based Thermal Power Plant at Orissa

NLC 4X500 MW 18.65

5 Refinery Residue Power Plant at Chennai

NLC 492 MW 2.35

c. Infrastructure Construction

� Ports

Maritime transport is a critical infrastructure for the social and economic development of a country. It influences the pace, structure and pattern of development.

Historically, investment in the transport sector, particularly in the ports, have been made by the States. A large volume of resources have been required, with long gestation periods, uncertain returns and various externalities, both positive and negative. Major expansion is now required in the port infrastructure sector in the country in order to handle the sea borne traffic on account of increasing foreign and coastal trade. The planned investment in port infrastructure will boost the demand not only of construction equipment but also of port handling equipment. The major ports were opened for private sector participation in 1997 and till date nearly Rs.10,000 crores of projects have either been implemented, or are under progress. In addition, there have been huge investments in minor ports under the State Maritime Boards. Container traffic in India has seen a phenomenal 20% compound growth rate in the last decade. The traffic volume has gone up from 0.68 MTEUs (Million Twenty Feet Equivalent Units) in 1990-

91 to 3.9 MTEUs in 2003-04. Recent policy initiatives taken by the Govt. will give a further fillip to this growth. As per present trends in the EXIM trade, container traffic is expected to increase to a level of 7.0 MTEUs by 2006-07.

To meet the demand, the ports have been expanding their infrastructure in a big way. In addition, private ports have come up, particularly in Gujarat adding to handling capacity in the region. In the meantime, JN Port is planning a fourth container terminal with private sector participation at an approximate cost of Rs.2000 crores. An investment of nearly Rs.700 Crores is also on the anvil for deepening the channel so that bigger ships can call at the port. The total investments planned or under execution in the JN Port today are of the order of Rs.3500 Crores.

� Urban infrastructure

Till recently, the main market for construction machinery, especially excavators was the infrastructure sector. The demand now mainly comes from urban construction comprising of housing/mall projects, petro-pipelines, minor irrigation, and maintenance work. Versatile construction equipment such as backhoe loaders are being offered on hire all over the country by small & medium sized contractors and the equipment hiring sector is expanding rapidly, leading to additional demand for equipment. Mandatory requirements of equipment ownership by contractors and easy availability of finance for equipment purchase have given a boost to the development of a stable market for smaller construction equipment. The centrally sponsored scheme for infrastructural development in mega cities was initiated during 1993-94. The primary objective of the scheme was to undertake infrastructure development projects of city/regional significance covering a wide range of components like water supply and sewerage, roads and bridges, city transport, solid waste management etc.

The State Level Sanctioning Committees in the mega cities approved 675 projects at an estimated cost of Rs.8693.98 crore. An expenditure of Rs.3834.34 crores has already been incurred on the approved projects. The Mega City Nodal Agencies were making efforts to mobilise institutional finance and an amount of Rs.1690.36 crore was mobilised from HUDCO and other sources. With a view to catalyzing investment in townships, housing, built-up infrastructure and construction-development projects as an instrument to generate economic activity, create new employment opportunities and add to the available housing stock and built-up infrastructure, the Government has decided to allow FDI upto 100% under the automatic route in townships, housing, built-up infrastructure and construction-development project (which

would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure), subject to fulfillment of conditions prescribed in the Department of Industrial Policy & Promotion Press Note No.2 (2005 Series) dated 03.03.2005.

Centrally Sponsored Scheme for Infrastructure Development in Mega Cities

Physical progress (As on 30.09.05)

(Rupees in crore)

Name of Mega City

No. of Projects

approved

Total Project Cost Number of projects Funds released

Institutional

Finance moblise

d

Expenditure

incurred

Revolving Fund

In progress

Completed

Yet to commenc

e Central Share

State Share

Mumbai 63 1785.58 23 39 1 330.02 273.04 297.88 772.35 314.08 Kolkata 130 1275.61 30 87 13 307.43 328.72 186.49 705.34 41.62 Chennai 200 2153.42 32 157 11 257.51 242.96 815.23 1595.57 319.26 Hyderabad 224 2067.05 62 109 53 257.73 257.21 183.93 475.94 21.00 Bangalore 58 1412.32 21 33 4 241.85 228.74 206.83 285.14 144.28 TOTAL 675 8693.98 168 425 82 1394.54 1330.67 1690.36 3834.34 840.24

The Union Government has permitted setting up integrated townships at the following places:-

• Gurgaon (Haryana) • Hyderabad (Andhra Pradesh) (two projects) • Mohali (Punjab) • Chennai (Tamil Nadu) • Bangalore (Karnataka) • Kolkata (West Bengal)

The annual estimated investment required for urban water supply, sanitation and roads is around Rs.28,035 crores for the next ten years. The Central Public Health Engineering (CPHEEO) has estimated the requirement of funds for 100 percent coverage of the urban population under safe water supply and sanitation services by the year 2021 at Rs.172,905 crores. Estimates by Rail India Technical and Economic Services (RITES) indicate that the amount required for urban transport infrastructure investment in cities with population of 100,000 or more during the next 20 years would be of the order of Rs.207,000 crores.

Road & Bridges Construction The Government of India has identified improved infrastructure as the key to achieving higher economic growth of the country. Modernisation of the road sector has been taken up on a priority basis and the National Highway Authority of India (NHAI) has been set up to implement & manage the time-bound National Highway Development Programme (NHDP) consisting of four and sixlaning of existing national highways linking all major cities. It comprises of the 5,950 km. Golden Quadrilateral and the 7,300 km. North-South & East-West Corridor Projects, to be completed by 2003 and 2007 respectively. NHAI specifies qualifying criteria for bidders in terms of capital equipment to be owned, construction methods to adopt and third party quality control by consultants.

The funding for the highway programmes is generated by a levy of Re.1 per litre cess on petrol & diesel. 50% of the estimated Rs.60 billion annual collections are earmarked for development of rural roads.

The Ministry of Shipping, Road Transport & Highways has so far accorded in principle approval to 81 proposals amounting to Rs.402.62 crores and 116 proposals amounting to Rs.521.24 crores under the Inter-State Connectivity Scheme. An amount of Rs.170.59 crores (Rs.162.05 crores for the States and Rs.8.54 crores for UTs) is earmarked for this purpose during the year 2005-06.

The construction equipment sector has witnessed a phase of high growth during the NHDP (Phase I & Phase II) projects and continuing investment in these projects will boost further demand for the sector. Others:

Government of India’s policy to promote substantial investments in the

infrastructure sector comprising of power, communications (roads, railway, air

transport & shipping including Airports & Ports), telecom, urban infrastructure

coupled with ambitious plans drawn up by the core sectors of the economy

namely power, coal, steel, cement and mining is expected to generate

substantial demand for mining and construction equipment in the coming years.

Power, ports, airports, urban infrastructure sectors are expected to be taken up in a big way.

As per the industry estimates, projections for future turnover in this sector is expected to reach Rs.7300 crores in 2005-06, Rs.8400 in 2006-07 and Rs.9950 in 2007-08.

Future Market

73008400

9950

15%

18%

0

2000

4000

6000

8000

10000

12000

2005-06 2006-07 2007-08

0

0.05

0.1

0.15

0.2

growth projection(Rs crores)

% increase over last year

Chart 19

In terms of the international scenario, the growth in the mining industry was strong during the year especially in Chile and China. Australia and South Africa reached historic growth levels. Prices continued to be favorable for the mining industry both for base and precious metals. The growing demand in China for metals by the construction and general engineering industry was a decisive factor for the increase in prices for base metal. The construction industry continued to grow during 2004 although with regional variations. Development in North America and Asia were positive, while it was weaker in Europe. In China the construction industry’s output value rose by more than 20%. The foreign investment gross inflows in the mining sector in Chile have increased from $ 350 million in 2004 to $ 748 million in 2005. Since the beginning of 2005, BHP Billiton has invested $ 19 billion in Australia, $ 10 billion on takeovers and about $ 9 billion on new and established projects. In 2004-05 the value of Australia’s overall mine production has jumped 29% to $ 66 billion in 2005-06. The continuing surge in prices and demand is expected to lift the total value of production to $ 84 billion in 2005-06. The capital expenditure on mining in Australia has grown by $ 31 billion in the last three years.

Mine Investments in 2004

Country Billion USD

Africa 15 Australia 14 Asia 13 North America 12 Chile 12 Peru 8 South Africa 7 Canada 7 Brazil 7 USA 4

Source: Raw Materials Data, Stockholm, Sweden January 2005

Investments by the mining and mineral industry saw an increase as a result of the strong international demand for metals. This high investment in mining has encouraged world leaders like Komatsu to invest in two new plants to expand its production capacity of large equipment. (Komatsu press release dated 14-10-’05). The U.S. economy is growing at more than 3%, employment is increasing only slightly faster than the growth of the labor force, and core inflation is 2%. Interest rates should continue to support growth, particularly in business investment, and the economy should grow at more than 3.5% in 2005. The Canadian economy, benefiting from low interest rates and high commodity prices, should grow at about 3% in 2005. Demand is expected to be higher with rapid growth in both mining and non-residential construction sectors.

The Euro-zone economies appeared to improve from the end of 2004, and the European Central Bank is expected to hold interest rates steady through the middle of the year. Overall European growth is expected to exceed 2% in 2005, somewhat better than in 2004, and construction spending should continue to recover. It is anticipated that economies in Africa and the Middle East will grow at about 4.5%, with the Commonwealth of Independent States by more than 6%. Both regions will benefit from favorable commodity prices and increased production of materials and energy hence pushing up the demand for mining equipment.

Economies in Latin America should grow at more than 3.5% in 2005, as a result of favorable metals and energy prices. Increased capital inflows and a more favorable foreign debt profile. Both mining output and construction spending will increase. Exporters can expect good demand from Latin America.

Asia/Pacific: The regional growth is expected to average about 6% this year, with most countries slowing from last year’s pace. Low interest rates should prolong recoveries in consumer spending and business investment, while competitive exchange rates are likely to boost exports. Fast growth in the region, which has taxed infrastructure capacity and should prompt governments to increase infrastructure spending. Reconstruction in areas hit by the tsunami will require additional machines. In China, government administrative measures are expected to continue, causing sales into that country to decline. Demand for raw materials from China, the US, Europe and the rest of Asia has remained strong in 2004. Demand for iron ore was driven by an increase in steel production of 8.8%, while Chinese production of steel grew by 23.2%. Recent settlement of iron ore prices (up 71%) with the Japanese and Chinese Steel mills indicates that the top four mining companies, who all have major iron ore interests, should continue their revenue growth trend in 2005. The sharp increases in commodity prices over the past few years, driven by the growing demand and the weaker US dollar, have been a re-emergence of the global mining industry, which has outperformed the rest of the market since 2003. The increase in investor appetite for mining companies is illustrated by the widening gap

between the HSBC Global Mining Index and the S&P 500 and the Dow Jones Industrial Indices over the past three years. This is a welcome reversal for a so-called “sunset” industry which had under-performed against other indices for the best part of the last two decades. Interim results from many companies indicate that 2005 should report an even stronger performance. A number of mining companies indicated in 2003 that the likelihood of large takeovers in the sector was remote, as assets were considered too expensive. They believed that the climate was not appropriate for acquisitions and that it would be better to make acquisitions when commodity prices had cooled down and valuations of companies were at more conservative levels. Such views were contradicted by the actual levels of mergers and acquisitions (“M&A”) activity in 2004. The current level of M&A activity has not been surpassed since 2001, which witnessed the BHP merger with Billiton and the restructure of Anglo American and De Beers. The levels of reported M&A activity during the first quarter of 2005 suggest there may be a further increase in M&A activity across the global mining industry in the year ahead. The market response to M&A transactions has generally been positive. For example, BHP Billiton’s share price remained stable on the news of the acquisition bid for WMC Resources despite the bid price of US$ 7 billion being well above the pre-bid market value of US$ 5 billion. Some commentators indicate that the market considers that the industry is experiencing a long-term sustainable boom and that no downturn is expected in the commodity cycle in the short to mid term. Others warn of a risk that mining companies are overpaying for assets in current M&A transactions. Shareholders’ equity of mining companies increased by 27% in 2004. This increase is attributable to the earnings, which have been retained and in part reinvested in development projects. Total Shareholder Return (“TSR”) of a company is defined as the ratio of total shareholder returns, comprising share price appreciation and dividend payments, in any given period against opening share price, and provides a measure of value creation. The top five performing companies are engaged in either base metals, coal or uranium, reflecting the continued strong demand for commodities and a change in the world’s energy markets – rising consumption of coal in the US, increasing imports of coal to China, and the increased use of nuclear energy to combat greenhouse gas issues. Borrowings and Liquidity

2004 2003

Net debt to equity ratio 25.4% 39.7% Current ratio 1.59 1.39 Quick ratio 1.05 0.86

Net debt (borrowings less cash) US$ 41.8 bn. US$ 51.5 bn. Whilst a significant portion of the industry’s improved liquidity has been used to fund new development projects, including capital expenditure of US$ 22.5 billion, borrowings have also been repaid, which has reduced the net debt to equity ratio to 25.4%. Aggregate capital expenditure amounted to US$ 22.5 billion, up 24% from 2003. As previously mentioned, capital projects are largely being financed through cash generated from operations as opposed to borrowings or equity placements. The four largest companies account for 44% of the total capital expenditure in 2004, but their proportion has decreased from approximately 50% in the previous year. This is largely due to the fact that many smaller companies, encouraged by the buoyant market prospects, have increased their investments in development projects in 2004.

The demand growth for the equipment industry in India has been at a level of 33% in

2004-05 compared to 24% in 2003-04.

The equipment market in India as well as globally has grown annually at approx 15 -

25% in the last two years. The growth rate has been higher in 2004-05.

The main reason for the strong rise in sales were continued high activity in the mining industry and the favorable development in the construction industry market worldwide. No major structural changes in the industry were reported during 2004. The consolidation among the small and medium sized competitors continued. The overall business environment remained positive in most markets with the exception of a significant slow down in China during the second half of the year due to the Governmental measures taken to slow the economy. These actions had an impact on the total market for excavators. Other areas impacting general business conditions for the industry in 2004 were currency developments with a weakening of the US$ and cost increases and supply shortages of raw material such as steel and rubber.

15%

33%

5%

23%

14%

38%

10%

24%

0%

5%

10%

15%

20%

25%

30%

35%

40%

INDIAN INDUSTRY KOMATSU CATERPILLAR VOLVO

SALES GROWTH

2003 2004

(All figures pertain to the parent companies)

Chart 20

While the global economic growth is expected to slow slightly compared to last year, indicators suggest that the global markets for equipment will continue to experience solid growth. The year will benefit from improved price realization, increased volume, manufacturing efficiencies and an intensified focus on cost structure by all companies. Material cost pressures will continue for the first half of 2005, with some relief expected in the last six months with the stabilization of steel prices. As a result, the latter half of 2005-06 will be stronger. It is also evident from Annexure-V that the percentage growth in exports from India to various world markets has shown an increasing trend. However, most of the companies who have technological tie-ups with world leaders are constrained in their agreements to export beyond the SAARC countries. Only companies who have developed innovative products over the years and are manufacturing equipment based on their own innovation and R&D are exporting worldwide. Out of the companies surveyed, only 75% of them exported their products to either other customers, or to their own parent company. The following is a graphical representation of the percentage of companies exporting to the various countries. Some of the companies are exporting equipment back to the parent company.

COUNTRIES EXPORTED TO

MIDDLE EAST AND IRAQ

20%

SOUTH AND NORTH

AMERICAN COUNTRIES

4%

EUROPEAN

COUNTRIES

16%

AFGHANISTAN

5%

SOUTH EAST ASIAN

COUNTRIES

5%

AFRICAN COUNTRIES

15%

SAARC COUNTRIES

35%

Chart 21

The export opportunities have increased in countries like Iraq and Afghanistan which are trying to rebuild themselves. A number of other countries in the Gulf are also investing in infrastructure while countries like South Africa are investing in mining. Indian companies have made forays into these regions with success. However export to sales is very low at 5% of its sales. ROADMAP The Indian mining and construction equipment industry has evolved primarily on the basis of domestic demand generated over the various plan periods, essentially on the basis of investments which have gone into mining, infrastructure development and the building and construction sector. Today it is still focused largely on the domestic market and exports are marginal at a level of around Rs.300 crores for an industry approaching a market size of Rs.7,000 crores. The opening up of import competition has led to tightening up in operational efficiencies across the entire sector. The larger companies who are market leaders and who have overseas tie-ups have been the first in their respective product groups to start benchmarking with global efficiency levels. The survey results have revealed that in many respects they are still far behind global benchmarking norms. However, the customers in the mining and construction sectors are increasingly becoming conscious of quality, productivity and down time and demanding better performance from Indian suppliers who have been complying with the expectations of the market due to the threat of import competition. This process is expected to accelerate. The survey results have identified some of the areas where operational efficiencies are required to improve. Indian companies need to become more mindful of this. The industry is expecting a process of consolidation to take place. This is expected to pick up with the entry of the remaining global majors who are yet to set up bases in India. Expectedly, the route for consolidation will be through mergers and acquisitions where the smaller units who are unable to stand the process of competition will ultimately sell up to the larger players in the market.

While the Indian companies will certainly base their business decisions on the basis of expectation of demand in the Indian market, the industry’s perspective on the export market is required to undergo a transformation in order to provide long-term buoyancy in terms of demand for their Indian operations which may not necessarily be entirely dependent on the investment cycle in infrastructure and mining in the Indian economy. The report has also tried to outline the fact that very significant investments are being made in capital expenditure by the global mining majors and countries like Australia, China and Chile are embarking on huge capital investments to develop mines and enhance expectations seen in conjunction with the expected investment in construction, this augurs well for the equipment producing industry the world over. In such a scenario, India can emerge as a lower cost sourcing hub for equipment. To some extent this trend is already in evidence, for example Caterpillar Inc. is producing some equipment for the South East Asian market in India. It is expected that this trend will only enhance and gain further momentum. In the circumstances, it is all the more important for Indian companies to pay attention to achieving global levels of efficiency and productivity in order to meet the challenges of the external market. There are certain advantages which Indian companies have in terms of lower cost for labour and design engineering. This can be leveraged to provide cost efficiencies and support strategies aimed at selling comparable equipment at lower prices. Hence productivity will have to improve significantly. A manufacturer’s competitiveness in today’s terms is not limited to products but extends to customer support. Capital goods are expected to meet the needs of customers more so construction and mining equipment whose productivity and performance is directly linked to the customers’ profitability. The availability of sophisticated equipment results in higher quality work, shorter turnaround time, less delays due to lower downtime and maintenance and hence less cost overruns. Here it is very important for manufacturers to produce machines which meet the expectations of customers, be it improving operating efficiencies, or reducing costs of deployed machines. In this respect Indian companies need to further improve their after-sales service through better customer relationship management, training and product support. However, it is important to note that the demand for greater mechanization and productivity will largely come from the large scale mining operations. There are a large number of small mines in India which will continue with lower levels of mechanization. Companies need to increase their spending on training and focus on human resources development to attain a highly motivated, knowledgeable and trained sales and service force to offer better customized solutions. Companies need to enhance their spending on R&D to develop new innovative product and ways and means to improve their products in terms of power to load ratio, SHE policies, reducing operating costs and usage of better materials. The domestic industry suffers due to poor aesthetics of finished products since research on material engineering is not upto international standards due to high investments required.

World leaders are constantly researching and coming out with new models with the latest features at regular intervals and this can be achieved by Indian companies by allocating higher amounts for R&D since the testing equipment required for R&D labs are very expensive. Companies also need to invest more into their R&D to produce equipment without the help of foreign technology otherwise they will be restricted in their global market access. Quality is another aspect, which affects the productivity and life of a machine. Though the quality consciousness of the industry is fairly high as compared to other sectors, the industry needs to educate and encourage its sub-suppliers to attain higher quality standards. The industry should procure components from ISO certified companies thereby forcing more and more sub-suppliers to be ISO compliant. To increase the inventory turnover, companies need to focus on their supply chain management. The industry needs to invest a substantial amount into IT for ERP or SCM to further reduce their working capital requirement by better inventory management and debtor management to achieve better return on the capital employed. This will also ensure better customer servicing by catering to demand faster. Companies need to relook at their business processes to reduce cost to offset the increasing raw material prices. Since a substantial amount of bought-outs are imported, the industry needs Government support for better infrastructural facilities for importing and easier procedures, which will reduce the turnaround time and allow the companies to carry low inventory levels.

• There are a few components like

Hydraulic control valves (main)

Slewing rings

Anti friction bearings (taper roller, spherical roller and cylindrical roller bearings) 75 mm and above shaft dia.

Hub reduction axles and transmissions for wheel loaders, backhoe loaders, dumpers, grader and compactors.

High pressure hoses (base hose)

Abrasive resistant steel plates

Micro processors

Large size springs (50 dia. Wire)

and some specialized bearings which are not manufactured in India.

• GOI may consider bringing down the customs duties on these components to a minimum of 5% to make the cost of equipment competitive. There are a number of proprietary critical items which have to be imported by a majority of

the manufacturers. These items may be given a reduction in duty to make the cost of equipment cheaper and competitive in the export market.

Inspite of the sharp hike in steel prices, profitability has been better in the last two years due to increased sales, better sales price, strengthening of the Rupee and continued efforts to reduce production costs. The cost of production needs to be further reduced and hence companies need to work upon human resources management to improve employee productivity. This can be tackled by proper training of manpower, proper utilization of the right talent in the right place which is presently lacking in the manufacturing industry. Average employee wages needs to be increased to attract and retain talent considering the skewed aptitude of the budding engineers and technicians towards IT industry. Value addition of the industry is comparatively low at 37%. Import of new as well as second hand machines is leading to an unhealthy price competition and creating pressure on margins considering the increasing steel prices.

The following recommendations therefore require consideration: - 1. Import of second-hand machinery more than 7 years’ old should be allowed

only at a duty which is equivalent to its bound rate. 2. Machinery more than 10 years’ old should not be allowed for import. 3. Manufacturers of Capital Goods should be allowed to import second-hand machinery upto 10 years’ old without export obligation. 4. The importer should be required to furnish a clearance certificate from a

Government recognized certification agency of the country of origin. Customs clearance should be dependant on obtaining such clearance certificate from the nominated agencies.

5. In the case of construction machinery, the equipment imported should be

compliant with the standards set by the Society of Automotive Engineers (SAE), American Society of Mechanical Engineers (ASME), American Society of Automotive Engineers (ASAE) and Organisation of Safety and Hazard (OSHA).

6. Such equipment, after customs clearance, should meet the CMVR stipulations

on homologation, including emission norms for which clearance should be obtained from ARAI, or its equivalent, as may be specified. The importer should thereafter furnish the equipment for testing and clearance.

7. Customs duty for imports from all countries should be uniform.

As far as the domestic market is concerned, there are some inherent disadvantages faced by Indian companies in regard to a level playing field. To ensure a level playing field for the indigenous manufacturers, the following Customs notification should be reviewed. Customs Notification No. 85/99 dated 06-07-‘99 issued by MOF, allows import of goods at “Nil” rate of duty for execution of projects, financed by United Nations, World Bank, Asian Development Bank and other international organizations, approved by the Government of India. With regard to road projects, funded by the above agencies, imports of construction equipment are being allowed to contractors for execution of projects at “zero” duty (Basic + CVD) whereas indigenous manufacturers of such equipment like excavators, compactors, wheel loaders, etc have to pay a basic customs duty of 12.5% on their imported inputs. Some of these measures need to be considered by Government in order to compensate for the disadvantages faced by domestic manufacturers.

• Excise Duty on Earthmoving and Construction Equipment has progressively gone up from 8 to 16% in the last decade. Excise Duty on these equipment is not eligible for CENVAT set-off. In order to reduce the cost of infrastructure projects, Excise Duty should be reduced from 16% to 8%.

• To ensure a level playing field, GOI should eliminate 0% customs duty or

should impose 4% countervailing duty under Section 3(3) of the Customs Act on all capital goods and project imports attracting Nil customs duty to counter balance internal taxes such as CST on indigenous capital goods.

Annexure-IV

BENCHMARKING - 2004

Indian

Companies Caterpillar Komatsu Volvo

(Rs. in crores) ($ Mn.) (Yen Mn.) (SEK M)

Group sales 30251 1434788 202171

Segment sales 6300 28336 1061161 28685

Cost of sales -- 1066887 --

Operating income -- 1572

Inventory 4675 307002 28598

Receivables 7459 139559 39065

Employees 76920 -- 9930*

PBIT 2937 109912

PAT 1976 41951

% increase in segment sales 33 38% 23% 28% % increase in operating profit over the previous year

More than 95% 46% 45.5% 75%

Inventory turnover 4 6.5 4.7 7

R&D as a % of sales 0.6 3.1 3.2 3.4 No. of days sales outstanding 83 90 36 70

Sales per employee (Rs. Lacs) 35 173+ 162+

PBIT / Sales 12 6.7% 7.7% 9%

* for the segment +(1 US$=Rs.44, 1 SEK=Rs.5.80)

ANNEXURE-V

EXPORTS FOR CONSTRUCTION AND MINING EQUIPMENT

Commodity: 8427 FORK-LIFT TRUCKS;OTHER WORKS TRUCKS FITTED WITH LIFTING OR HANDLING EQUIPMENT Unit:

S.No. Country Values in Rs. Lacs Quntity in thousands

2003-04 2004-05 %Growth 2003-04 2004-

05 %Growth

1. AFGHANISTAN TIS 41.85

2. ALGERIA 153.95

3. AUSTRALIA 0.96

4. BAHARAIN IS 56.11 35.85 -36.12

5. BANGLADESH PR 0.39 6.98 1,666.49

6. CHAD 21.63

7. TAIWAN 0.59

8. EGYPT A RP 223.34

9. ETHIOPIA 8.63

10. GERMANY 17.63

11. GHANA 8.31

12. IRAN 11.36 7.07 -37.76

13. IRAQ 8.13 204.15 2,410.14

14. KENYA 16.07 16.08 0.02

15. KUWAIT 72.02 29.95 -58.42

16. LIBYA 34.94 50.03 43.17

17. MADAGASCAR 10.70

18. MOROCCO 10.96

19. NEPAL 0.13

20. NIGERIA 46.95 91.52 94.95

21. OMAN 5.82 61.20 950.77

22. QATAR 11.89 27.80 133.83

23. SAUDI ARAB 40.07 135.03 237.00

24. SINGAPORE 2.56

25. SRI LANKA DSR 38.13 29.83 -21.76

26. SUDAN 14.42

27. TANZANIA REP 39.83 30.86 -22.51

28. TOGO 4.08

29. TUNISIA 5.22

30. TURKEY 16.81

31. UGANDA 17.67

32. U ARAB EMTS 313.12 174.85 -44.16

33. U K 4.64 66.38 1,330.48

34. U S A 5.43

35. UZBEKISTAN 10.99

36. YEMEN REPUBLC 1.93

Total 1,161.16 1,083.71 -6.67

Commodity: 8429 SLF-PRPLD BULLDOZERS, ANGLE DOZERS, GRADERS LEVLRS,SCRPRS,MCHNCL SHOVLS,EXCVTRS,SHOVL LOADERS,TAMPING MACHINES & ROAD ROLLERS Unit:

S.No. Country Values in Rs. Lacs Quntity in thousands

2003-04 2004-05 %Growth 2003-04 2004-

05 %Growth

1. AFGHANISTAN TIS 423.16 285.73 -32.48

2. AUSTRALIA 3.01

3. BANGLADESH PR 333.11 54.72 -83.57

4. BELGIUM 23.41

5. BHUTAN 85.52 52.22 -38.94

6. BOTSWANA 10.23

7. CHILE 285.41

8. CHINA P RP 143.78

9. DJIBOUTI 354.77

10. ETHIOPIA 36.98

11. FRANCE 3.29

12. GAMBIA 25.40

13. GEORGIA 658.25 521.39 -20.79

14. GERMANY 262.56

15. GREECE 25.27

16. GUINEA 2.99

17. HUNGARY 11.93

18. IRAN 57.16 587.58 927.96

19. JAPAN 0.30

20. KAZAKHSTAN 350.16

21. LIBYA 228.53 81.97 -64.13

22. MALAYSIA 202.16

23. MALDIVES 581.74

24. MONGOLIA 67.61 179.67 165.74

25. NEPAL 46.18 40.24 -12.85

26. NETHERLAND 0.89

27. OMAN 96.26

28. PAKISTAN IR 4.83

29. SAUDI ARAB 376.66

30. SINGAPORE 75.46

31. SOUTH AFRICA 370.68 196.89 -46.88

32. SRI LANKA DSR 111.41 346.25 210.79

33. SUDAN 1.47 76.22 5,084.21

34. SURINAME 816.17

35. SWEDEN 1.16

36. SYRIA 966.05 970.96 0.51

37. TANZANIA REP 16.47 73.81 348.24

38. THAILAND 0.67

39. TOGO 5.82

40. TUNISIA 191.73

41. UGANDA 9.54

42. U ARAB EMTS 32.91 895.76 2,621.66

43. U K 9.44

44. U S A 66.59 758.09 1,038.44

45. VIETNAM SOC REP

58.30

46. YEMEN REPUBLC 66.57

47. ZAMBIA 37.85

48. UNSPECIFIED 218.63

Total 5,248.95 7,630.99 45.38

Commodity: 84303110 COAL MINING MACHINERY (COAL CUTTERS) Unit: NOS

S.No. Country Values in Rs. Lacs Quntity in thousands

2003-04 2004-

05 %Growth 2003-04

2004-05

%Growth

1. FRANCE 2.37 19.19 708.55 0.00 0.00 200.00

2. IRAN 8.10 0.00

Total 10.48 19.19 83.15

CRANES Commodity: 842611 OVERHEAD TRAVELLING CRANES ON FXD SUPPORT Unit:

S.No. Country Values in Rs. Lacs Quntity in thousands

2003-04 2004-

05 %Growth 2003-04

2004-05

%Growth

1. BAHARAIN IS 8.52 0.00

2. BANGLADESH PR 53.79 47.98 -10.80 0.01 0.00 -33.33

3. BHUTAN 92.10 0.01

4. EGYPT A RP 129.99 0.00

5. ETHIOPIA 4.12 0.00

6. IRAN 122.93 0.01

7. KUWAIT 152.62 0.01

8. MALAYSIA 1.48 0.00

9. MAURITIUS 12.60 0.03

10. MYANMAR 146.23 0.01

11. NEPAL 1.73 7.68 345.40 0.00 0.00 100.00

12. NIGERIA 16.41 0.00

13. OMAN 21.56 19.02 -11.79 0.01 0.00 -33.33

14. QATAR 6.71 0.00

15. SAUDI ARAB 0.49 53.35 10,755.42 0.00 0.00 0.00

16. SRI LANKA DSR 186.53 23.57 -87.36 0.01 0.00 -72.73

17. SURINAME 116.06 0.01

18. SYRIA 50.58 0.00

19. TANZANIA REP 6.52 0.00

20. TRINIDAD 4.66 0.00

21. U ARAB EMTS 35.18 0.01

22. U S A 82.20 0.03

23. ZIMBABWE 15.79 0.00

Total 646.85 773.58 19.59

Commodity: 842620 TOWER CRANES Unit:

S.No. Country Values in Rs. Lacs Quntity in thousands

2003-04 2004-

05 %Growth 2003-04

2004-05

%Growth

1. BAHARAIN IS 0.59 0.00

2. BANGLADESH PR 115.79 0.02

3. BHUTAN 20.22 0.00

4. IRAN 149.46 0.01

5. KENYA 3.43 0.00

6. KUWAIT 38.62 0.00

7. NIGERIA 10.50 0.00

8. OMAN 8.47 0.00

9. PHILIPPINES 5.06 0.00

10. POLAND 127.84 0.00

11. SAUDI ARAB 30.64 0.00

12. SRI LANKA DSR 67.94 0.00

13. U ARAB EMTS 26.18 0.01

14. YEMEN REPUBLC 29.00 0.00

Total 398.45 235.28 -40.95

ANNEXURE-VI

INDIAN MINING AND CONSTRUCTION PROJECTS

Authorizer Home Country Description of Project Host Country

Projected Amount (Rs.Crores)

Date of Expiry

1 Jindal Steel and Power India Mining project India 12500 No expiry

2 Vedanta Resources India Iron ore mining India 12500

Company name Project Name Location Capacity

Target date of commissioning

Cost (Rs.crores)

3

Maharashtra State Road Development Corporation Ltd

Worli Nariman Point road project Maharashtra 14.77 km 31.12.2006 2800

4

Sethusamudran Corporation Ltd

Sethusamudram Ship Canal project

Tuticorin district of Tamil Nadu 2427.4

5

Hyderabad Urban development Authority

Greater Hyderabad Growth corridor project Andra Pradesh 158 km 31.12.2008 1410

6 Haldia Dev. Authority

Bridge construction

Haldia & Nandigram 75

7

Ministry of North East (DONER)

Infrastructure project North East 345 km 282

8

Ministry of North East (DONER)

Infrastructure project North East 940 km 1042

9 Construction of 595 stop dams Chattisgarh 1657.26

Company name Project type Capacity Location

10 Sonepur Bazaar Mine Mining project 8 mntpa Sonepur 11 Chitra Mine project Mining project 2 mtpa 12 Highwall Mining project Mining project 3.2 mntpa Sripur

RAILWAY OVER-BRIDGES TO BE TENDERED BY RBDCK

Sl.No Name of ROB Location L.C.No. Rly. Kms

Status

1 Kanhangad Town Kanhangad Yard 274 816/13-14

GAD Approved by Railways

2 Cheruvathore (Padanna Road)

Cheruvathore Yard 268 801/9-10

GAD Approved by Railways

3 Payyannore Payyannore - Cheruvathore

261 787/15 GAD Approved by Railways. Land acquisition in progress

4 Canannore Town Canannore and Canannore South

241 752/1-2

GAD Approved by Railways

5 Tellichery Mahe- Tellicherry 228 731/13-14

GAD Approved by Railways

6 Jaganatha Temple Gate Mahe- Tellicherry 226 730/7-8 GAD Approved by Railways.

7 Kunhippally Mukali - Mahe 217 721/6-7

GAD Approved by Railways. Land acquisition in progress

8 Kainatty Road Badagara - Mukali 216 714/14 GAD Approved by Railways. Land acquisition in progress

9 Koilandy Elathur and Quilandy.

201 688/2-3 GAD Approved by Railways. Land

acquisition in progress

10 Amalapuri - 4th Gate Calicut and Vellayil 185 666/3-4

GAD Approved by Railways

11 Panniyankara ( Deposit Work )

Feroke and Kallai 178 662/5-6

GAD to be Approved by Railways

12 Parappangady Parappanangady and Vallikkunnu

174A 639/14-15

GAD Approved by Railways. Land acquisition in progress

13 Devdhar Tirur and Tanur 172 629/11-12

GAD Approved by Railways. Land acquisition in progress

14 Thirunavaya Thirunavaya Yard 170 615/3-4 GAD Approved by Railways. Land acquisition in progress

15 Palghat Town - Commonwealth Palghat and Palghat Town

52 56/4-5 GAD to be approved by Railways

16 Mulamkunnathukavu Yard Mulamkunnathukavu and Poomkunnam

14 23/5-6 GAD Approved by Railways. Land acquisition in progress

17 Trichur Town Poomkunnam and Trichur

19 30/14-15

GAD Approved by Railways

18 Nandikkara Pudukkadu - Irinjalakkuda

31 49/2-3 GAD Approved by Railways. Land acquisition in progress

19 Aloor-Mala Road Irinjalakkuda - Chalakkudy

45 58/2-3

GAD Approved by Railways. Land acquisition in progress

20 Vellanchira Irinjalakkuda - Chalakkudy

46 60/15 GAD Approved by Railways. Land acquisition in progress

21 Divine Nagar Chalakkudy - Karukutty

52 65/11-12

GAD Approved by Railways. Land acquisition in

progress

22 Puliyanam Road Karukutty and Angamali

59 74/12-13

GAD Approved by Railways. Land acquisition in progress

23 Nedumbassery Angamali and Chovvara

64 80/12-13

GAD to be approved by Railways

24 Vaduthala Kalamassery and Edappally

69 101/10-11

GAD to be approved by Railways

25 Pachalam Kalamassery and Edappally

71 102/13-14

GAD to be approved by Railways

26 Atlantis Ernakulam and Thirunettoor

76T 1/9-10

GAD to be approved by Railways

27 Kollam Town Quilon and Mayyanad Stations

541 156/8-9

GAD Approved by Railways

COAL INDIA LIMITED 1. ECL – Rajmahal : 6.5 million tonnes (MT)(Expansion from existing 10.5 MT to

17.0 MT) 2. CCL – Magadh & Amrapali Green-field Projects – 10 million tonnes, each TATA STEEL LTD.

1. Kalinga Steel – 6 million tonnes Steel (Iron Ore Mining – 10.6 million tonnes) 2. Tata Steel , Jamshedpur expansion from existing 5 MT to 7.4 MT Steel by

2010 meaning Iron Ore Mining Expansion from existing 9 MT to 13 MT by 2010 Captive Coal Minining, 1. TISCO, West Bokaro Collieries SEB – 2.5 million tonnes by 2007 2. North Eastern Block - 2.5 million tonnes by 2010.

Projects Under Construction for Neyveli Lignite Corporation

Mine-II Expansion (4.5 MTPA)

Govt. of India has sanctioned the expansion of Mine-II from 10.5 million tonnes per annum (MTPA)th to 15.0 MTPA of lignite on 18 October 2004 at a capital cost of Rs.2161.28 crores, with a rd th schedule of lignite production on 53 month and attaining full capacity on 57 month from the date of sanction of GOI. Orders for execution of contracts for all major mining equipment and conveyor systems have been issued. TPS-II Expansion (2x250 MW)

Government of India sanctioned the installation of 2 units of 250 MW for expansion of Second Thermal Power Station on 18 October 2004 at a cost of Rs.2030.78 crores, with a scheduled rd th commissioning of Unit-I on the 53 months and for Unit II on the 57 month from the date of sanction of GOI. Tendering activities are in progress.

Barsingsar Mine Project (2.10 MTPA)

GOI has sanctioned the Barsingsar Mine Project on 15 December 2004 at a capital cost of Rs.th 254.07 crores, with a schedule of lignite production on 45 months and attaining full capacity on th 54 months from the date of sanction of GOI. Tendering activities are in progress. Barsingsar Power Project (2x125 MW.)

Government of India sanctioned the installation of 2 units of 125 MW in Barsingsar Power Project th on 15 December 2004 at a cost of Rs.1114.18 crores, with a scheduled commissioning of Unit-I on th th the 48 months and for Unit II on the 54 months from the date of sanction of GOI. Tendering processes are in progress.

3. Kotra Basatpur – 2.5 million tonnes by 2008. ALUMINIUM 1. NALCO - 2.56 MT Expansion of Bauxite Mining by 2007.

2. Vedanta Alumina, Langighar, Orissa – 2.1 MT Bauxite Mining by 2007.

3. Aditya Alumina , Koraput, Orissa – 1.16 MT Bauxite Mining by 2007

SAIL

1. SAIL would require 32.5 million tonnes of iron ore per annum for which RMD has been working on the expansion plan.

2. The major projects identified are capacity expansion of Bolani mines to 5

million tonnes per annum and development of central block at Meghahatuburu mine to 4.3 million tonnes per annum.

3. RMD would also develop the south block at Kiriburu and increase its production

to 4.25 million tonnes per annum. The division has planned to develop the Taldih block and a new mine at Thakurani.

4. RMD had taken steps to improve the iron ore quality by optimising the washing

plant at Meghahatuburu by introducing stub-cyclones and replacement of old liners among others.

LIST OF NEW PROJECTS FROM MINISTRY OF COAL

OVERSEAS PROJECTS

Authorizer

Home Country

Description of the Project

Host Country

Projected Amount (Rs. Crores) [1 USD= Rs 45.27] and 1 RAND = RS.6.78 and 1 EURO = Rs 53.65

Date of Expiry

Funding Authority

1

Daewoo Engineering and Construction Ltd Korea

Construction of motorway Korea 1697.6 2009 ADB

2

Gansu Provincial Communications Department China

Road Development

Gansu Province, China 1358.1 2009 ADB

3

Mine Restructuring Company Poland

Poland-Hard Coal Mine Closure Project Poland 837 31.03.08

4 Thai Government Thailand

Construction of motorway section and bridge Thailand 2500 2007 Thai Govt

5

Sichuan Provincial Communications Department China

Central Sichuan road development

Sichuan Province, China 2716.2 ADB

6 Ministry of Railways China

Zhengzhou-Xi'an road development China 1810.8 ADB

7 Barrick Canada

Pascua-Lama copper and gold project

Argentina/ Chile 6564.15

scheduled to start production by 2009

8 Xstrata Switzerland

Exploration and possible exploitation of Las Bambas copper deposit Peru 5264.9

9 BHP Billiton Australia

Development of Spencer copper mine Chile 4527

10 Rio Tinto Australia

Expansion of existing iron ore operations and improvement of rail and water infrastructure Brazil 4527

11

African Rainbow Minerals & LionOre Mining International South Africa

Nkomati nickel-mine expansion project, Mpumalanga South Africa 1695 Jan-07

12 Sasol Mining

South Africa, Secunda

Irenedale coal mine project South Africa 183 Aug-07

13 Metorex Limited South Africa

Ruashi copper/cobalt mining project South Africa 305

scheduled to start by 2006

14

Cortez Joint Venture- Placer Dome and Kennecott Minerals Company South Africa

Cortez Hills Gold Exploration Project South Africa 166.11 2009

15 Motapa & Caledonia South Africa

Mulonga Plain Drill programme, Zambia South Africa 23

16 Mag Industries South Africa

Kouilou magnesium project South Africa 2263.5

17 Kenmare resources South Africa

Moma Titanium minerals project South Africa 2037.15 end 2006

18

Mittal steel and Liberian Government South Africa

Mining iron ore reserves in Western Liberia Liberia 4074.3

19

Mototolo JV -Xstrata and Angloplat South Africa

Development of platinum group metals mine South Africa 91530 2007

20

QIT Madagascar Minerals South Africa

Madagascar titanium dioxide project South Africa 3508.42 2008

21 Anglo Platinum South Africa

Turffontein replacement ore reserve platinum project South Africa 393.24 end 2006

22

Anglo Platinum & Bafokeng Community South Africa

Bafokeng Rasimone platinum extention project South Africa 813.6 2009

23 Spoornet South Africa

Linking coalfields of Mpumalanga to Eskom South Africa 1084.8 2010

24 Implats South Africa Development of No.16 shaft South Africa 3051

25 Arm & Implats South Africa

Development of a new platinum group metal mine South Africa 813.6 end 2006

26 African Platinum South Africa

Establishment of a platinum mine South Africa 1288.2

27

Ministry of Public Works, Department of Infrastructure, Eritrea

Road Sector Project Eritrea 108.6

World Bank

28 Road Development Sri Lanka

National Highways Sri Lanka 475.33 ADB

Authority Sector Project

29 Brazil

Minas Gerais Municipal Road Access Brazil 226.35

Inter American Development Bank

30 Columbia

Road Management project Columbia 226.35

Inter American Development Bank

31 Costa Rica

San Jose-San ramon Toll Road Development Costa Rica 339.52

Inter American Development Bank

32 Guyana Secondary Roads Program Guyana 45.27

Inter American Development Bank

33 Albania

Tirana Municipal Roads Development Project Albania 42.92 EBRD

34

National Rail company for Romania Romania

Transport Restructuring Project Romania 1018.5

World Bank

35 Brazil Espirito Santo State Highways Brazil 554.55

Inter American Development Bank

36

Bangladesh railway Authority Bangladesh

Infrastructure project Bangladesh 362.16

World Bank

37

Bosnia & Herzegovina Railways Public Corporation Bosnia

Bosnia & Herzegovina Regional Railway Project Bosnia 386.60 EBRD

38

Afghanistan Ministry of Public Works Afghanistan

Quasar-Bala Murghab Road Project Afghanistan 248.98 ADB

39

Ministry of Transport Uganda Uganda

Road Sector Project Uganda 189.5 AFDB